Next up: Senate considers regulation of health-insurance premiums

Ed MorrisseyPosted at 4:05 pm on April 21, 2010

After all, why stop at federal mandates on coverage? If Congress wants to really destroy the insurance industry, they need to start setting price controls to accelerate their collapse. According to the New York Times, Senate Democrats have already begun laying the groundwork for it:

Fearing that health insurance premiums may shoot up in the next few years, Senate Democrats laid a foundation on Tuesday for federal regulation of rates, four weeks after President Obama signed a law intended to rein in soaring health costs.

After a hearing on the issue, the chairman of the Senate health committee, Tom Harkin, Democrat of Iowa, said he intended to move this year on legislation that would “provide an important check on unjustified premiums.”

Mr. Harkin praised a bill introduced by Senator Dianne Feinstein, Democrat of California, that would give the secretary of health and human services the power to review premiums and block “any rate increase found to be unreasonable.” Under the bill, the federal government could regulate rates in states where state officials did not have “sufficient authority and capability” to do so.

This should prompt a rather embarrassing question: wasn’t ObamaCare supposed to prevent this very problem? Congressional Democrats and the White House certainly sold it as a cost-containment measure. They promised that their top-down, heavy regulatory approach would “bend the cost curve downward,” which should mean lower premium costs. The federal mandate was also supposed to reduce the rate of premium increases by forcing all of the healthy consumers in the US to buy, er, a comprehensive health insurance plan that they don’t need.

ObamaCare critics know that the bill won’t do anything to hold down costs, mainly because it amplifies the factors that drive up costs now rather than mitigates them. Even the New York Times managed to discover that in their own state after 17 years of the same kinds of “reforms,” although they didn’t bother to report it until after ObamaCare passed. Massachusetts and Maine had the same experience with premiums, and they had to respond with price-fixing solutions in order to keep citizens from throwing the architects of these plans out of office.

Price-fixing only succeeds in temporarily postponing the problem of cost control — because prices and costs are not the same thing. A price-fixing regulatory system will succeed in the long run only in forcing insurers into bankruptcy. Health insurers already operate on very thin margins. If they can’t raise prices to meet cost increases, they won’t make any profit at all, and all of their policyholders will wind up with no coverage.

Some will claim that this has been the intent of Democrats all along; they want to destroy the health-insurance industry in order to fully nationalize health care in the wake of the collapse of the industry. Whether or not that has been their intent, they couldn’t have possibly gone about destroying the industry in any better manner than what we’ve seen over the last year.